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ISBN 85694 239 1 

Guernsey Historical Monograph No. 23 
General Editor: J. Stevens Cox, F.S.A. 



The story of how the Island of 

Guernsey created its own money, 

without cost to the taxpayer, 

and established a prosperous 

community free of debt. 






Holloway was a founder member and has been 
Honorary Secretary of the Economic Research Council 
since 1955. He also edits a quarterly journal— Britain and 

He became interested in economic and monetary 
policy in the depression years of the 1 930s and founded 
the Economic Reform Club and Institute in 1936. The main 
objective of this organization was attained with the setting 
up by H.M. Government of the Radcliffe Committee on 
credit and currency in 1957. 

Holloway has made a special study of economic 
questions particularly in relation to monetary policy and 
also international trade and payments. Over the years he 
has lectured to hundreds of audiences including fifth and 
sixth forms at many of the leading public schools, the 
RAF, Navy etc. He is joint author of "Money: The Decisive 
Factor", published in 1959. Other publications include 
"The Case for an Atlantic Free Trade Area" in 1967, 
"Inflation and the Function of Monetary Policy in Britain" in 
1971 and "Honest Money: The Case for a Currency 
Commission" in 1976. 

He sponsored a 'Programme for National Recovery' in 
1967. This programme was supported by 19 economists 
and industrialists and resulted in the publication of live 
research reports which have played a significant part in 
changing the climate of opinion in the sphere of economic 
and monetary policy. 

New Arcade and Market Place, St. Peter Port, c.1840. 
After a lithograph published by M. Moss, bookseller, 

by James Glyn Ford 

This pamphlet, "How Guernsey Beat the Bankers", is a 
reprint of one issued in 1958 by the Social Credit 
Movement. It tells how the Guernsey States from 1819- 
1836 manipulated the issue of notes to allow a number of 
public works to be carried out — including both the 
construction of the Guernsey Market and the rebuilding of 
Elizabeth College — without increasing public debt. The 
details are contained within the pamphlet itself. The 
author, rightly, saw this as an anticipation of the idea of 
social credit. As such, for the very different audience that 
will read it now, a very brief background to the ideas and 
history of the Social Credit Movement in Britain may prove 

The Movement's origins lay with the economic theories 
of Major C.H. Douglas, who early this century wrote a 
number of books explaining that the then current economic 
problems were caused by the arbitrary control of the money 
supply by the banks and bankers. He proposed that money 
backed by gold or paper should be replaced by notes backed 
by the real wealth of nations, their goods, plant and 
machinery. A consequence of this would be that the 
parasitic role of bankers in the economy would be removed 
and the economy would as a result expand. 

Social Credit ideas have never become widely accepted 
although in the 1930s they gained some currency. In 1929 
a Social Credit Party was established in Britain under the 
leadership of John Hargrave. The 1930's was a time of 
political upheaval, and the Social Credit Party's para- 
military Greenshirts added another hue to the colourful 
street demonstrations of the decade, with the marching 
and countermarching of Moseley's Blackshirts, the red 
shirted Independent Labour Party and the khaki of the 
communists. At their peak in 1933 the Greenshirts could 
call on 10,000 supporters for their demonstrations in 
Britain's cities. At times the personification of their 
campaign of 'out with the Vipers' (i.e. the bankers) took on 
an anti-semitic flavour. 

The beginning of the end for them came in 1936 with the 
passing of the Public Order Act which banned political 
uniforms. Deprived of the presence that came with the 
impact of marching uniformed ranks they, along with their 

colourful counterparts, faded from the scene. All that 
remains in Britain now is a small group of enthusiasts. 
Elsewhere in the English speaking world the Social Credit 
Movement has had a fitful existence. Both New Zealand 
and Canada have elected Social Credit M.P.'s to their 
national parliaments. At provincial level in Canada they 
have had strong support in Quebec, and in Alberta formed 
the government. Even in these areas they are now in 


The announcement by the Chancellor of the Exchequer 
in his budget speech that he intends to set up a committee 
to inquire into monetary and credit policy is bound to focus 
attention on the workings of our financial system. Over the 
years there have been many interesting monetary 
experiments undertaken in various parts of the world. 

These have mainly taken place in small communities but 
they are none the less of interest. For example there was 
the experiment in the island of Guernsey in the period 
following the Napoleonic wars. There ware also 
experiments in the towns of Swanenkirchen in Bavaria and 
Worgl in the Austrian Tyrol which took place in the years of 
depression following the 1914-18 war. Another 
interesting example is the amazing development which 
took place in the island of Gosaba off the coast of India. 
These and similar experiments had one factor in common. 
A depressed and unproductive community was changed in 
a comparatively short while into an active prosperous and 
happy community. 

The story of the island of Guernsey is particularly 
interesting from our point of view for it is a relatively easy 
matter to see for oneself the actual buildings which were 
created — as a result of these experiments. For example 
the Market House and Elizabeth College were two 
examples of the result of the sensible money policy adopted 
by the island Parliament in the early part of last century. 
Other improvements included better roads, a modern 
sewage system; all of which were constructed without a 
debt being incurred by the community. 

These experiments have a considerable bearing upon 
our present monetary policy which, as is being 
increasingly realised, is in need of considerable revision. 
We make no apology therefore for re-telling the story of the 
successful monetary experiment in Guernsey. 


Our story opens in the year 1815. It was a year of 
considerable difficulty for the people of Britain but the 
people of the little island of Guernsey were particularly 
hard hit. The effects of the Napoleonic wars had resulted in 
a state of despair on the part of the island community due 
to the acute economic distress then prevailing. The 

following extract from a document presented by the States 
(as the island Parliament is called) to the Privy Council 
speaks very eloquently on the state of affairs: 

"In this island, eminently favoured by nature, 
nothing has been done by art or science towards the 
least improvement; nothing for the display or enjoy- 
ment of local beauties and advantages; not a road, not 
even an approach to the town, where a horse and cart 
could pass abreast; and the deep roads only four feet six 
inches wide, with a footway of two or three feet, from 
which nothing but the steep banks on each side can be 
seen, appeared solely calculated for drains to the 
waters which, running over them, rendered them ever 
yet deeper and narrower. Not a vehicle, hardly a horse 
kept for hire, no four-wheeled carriage existed of any 
kind, and the traveller landed in a town of lofty houses, 
confined and miserably-paved streets from which he 
could only penetrate into the country by worse roads, 
left the island in haste and under the most unfavour- 
able impressions. 

"In 1813, the sea, which had in former times 
swallowed up large tracts, threatened, from the de- 
fective state of its banks, to overflow a great extent of 
land. The sum required to avert the danger was 
estimated at more than £10,000, which the adjoining 
parishes subject to this charge were not in a condition 
to raise. The state of the finance was not consolatory, 
with a debt of £19,137 and an annual charge for 
interest of £2,390, the revenue of £3,000 left only 
£600 for unforeseen expenses and improvements. 
Thus, at the peace, this island round itself with little 
or no trade, little or no disposable revenue, no 
inducement for the affluent to continue their abode, 
and no prospect of employment for the poor." 
What a tale of woe. Small wonder that the people were 
depressed and any that could were making their way to the 
mainland. As often happens in communities when there 
are major difficulties, a committee was appointed in 1815 
to consider in particular the overcrowded state of the 
market, of which it was said that "humanity cries out 
against the crush which it is difficult to get out of, and 
against the lack of shelter for the people who, often arriving 
wet or heated, remained exposed for whole hours to wind 
and rain, to the severity of the cold and the heat of the sun." 

The committee examined the situation, and came to the 
conclusion that further taxation was impossible. The 
alternative was to try and borrow money from the banks. 
But this entailed the payment of a high rate of interest, 
which they could not afford, particularly in view of the fact 
that these interest payments would continue for years and 
would eventually mean that, although the original sum had 
been repaid in interest charges, the capital sum would 
remain as a debt. 

Fortunately for the people of Guernsey, they had at that 
time among their leaders some honest men of keen 
intellect, who put forward the revolutionary suggestion 
that the States should take advantage of their ancient 
prerogative and produce their own notes to finance the re- 
building of the market. At first this proposal was turned 
down. But later in the same yearthe proposal to issue State 
notes was agreed to, for a different purpose. The finance 
committee reported that £5,000 was wanted for roads and 
a monument to the late Governor, while they had only 
£1,000 in hand. It was agreed that the remaining £4,000 
should be raised by the issue of State £1 notes, 1,500 of 
which should be payable in April 1817, 1,250 in October 
the same year, and 1,250 in April 1818. "In this manner" 
STATES, we can easily succeed in finishing the works 
undertaken, leaving moreover in the coffers sufficient 
money for the other needs of the States." 


How wise they were is proved by the event. The success 
of this first creation of State money was so great that it was 
rapidly followed by others. In June 1819 the question of the 
market became ever more acute, and it was agreed to 
finance the rebuilding of it, not in the orthodox manner by 
raising a loan, but by the State creating the necessary notes 

The following comment made by the finance committee 
at a later date shows how successful the venture had 
become. It was at the time when a further issue of notes 
was made to diminish the interest-bearing debt to the 
States. The finance committee declared: "The States could 
increase the number of notes in circulation without danger 

up to 10 000 in payment of the debt and the committee 
recommends this course as most advantageous to the 
States' finance, as well as to the public, who, far from 
making the slightest difficulty in taking them, look for them 
with eagerness." 

And so the story went on. On 29th March 1826 a further 
issue was authorized to re-build Elizabeth College, which 
had been founded in 1563 by Queen Elizabeth, and some 
parochial schools. The Bailiff of that time — Daniel de Lisle 
Brock — in his address to the States Assembly expressed 
his belief that the creation of this new money was a great 
benefit to the States, and caused no inconvenience 
because of the great care with which it was issued. 

Various other creations of new money took place for 
projects of re-building, widening the streets of St. Peter 
Port, reconstructing some of its buildings, making new 
roads and public works of many kinds. The experiments 
continued over a period of 20 years, by which time the 
people of Guernsey had developed from a depressed 
unhappy state to a position of prosperity and happiness. 
The following brief quotation shows how improved was the 
situation as a direct result of the wise and statesmanlike 
action of the Island Parliament. Daniel de Lisle Brock, to 
whom, it seems, much of the credit must go, said in 1827: 
"To bring about the improvements which are the 
admiration of visitors and which contribute so much to 
the joy, the health and well-being of the inhabitants, 
the States have been obliged to issue notes amounting 
to £55,000. If it had been necessary and if it were still 
necessary, to pay interest on this sum, it would be so 
much taken from the fund earmarked to pay for the 
improvements made and to carry out new ones. 
To talk of joy, health and well-being is a very different 
story from the position in 1815, when it was little or no 
trade, little or no disposable revenue, and no prospect of 
employment for the poor." But this happy state of affairs 
was not to the liking of everyone, and opposition to the idea 
of the Island States creating their own "debt-free" money 
had been growing over the years, particularly among the 
banking interests on the island. A new bank, called the 
Commercial Bank, was founded in 1830. This institution, 
together with the old bank, failing to prevent the growing 
prosperity of the islanders, began to issue notes at its own 
discretion, flooding the island with paper money. 


Reference has already been made to the care exercised in 
deciding the quantity of money to be issued by the States, 
and now Daniel de Lisle Brock sought to restrain the private 
banks from this anti-social activity. 

There remains on record his spirited speech to the 

States meeting held in September 1836 on this subject, 

and the following two extracts are of particular interest: 

"No one has a right to arrogate to himself the power 

of circulating a private coinage on which he imprints for 

his own profit an arbitrary value. 

"With these facts before our eyes we must realise 

the necessity of limiting the issue of paper money to the 

needs and customs, and the benefit, of the community 

in general. Permission cannot be granted to certain 

individuals to play with the wealth and prosperity of 


In spite of all, however, the banks finally won the day. 

Despite a careful search of the records, no explanation of 

what actually happened can be found — merely an 

exchange of letters between representatives of the banks 

and the Bailiff of the Island. In this, the former suggested 

that the States should cease to make further issue, should 

withdraw £1 ,500 from circulation, and have no more than 

£40,000 in circulation. To this proposal the Bailiff agreed. 

Having read the account of his fighting speech to the 

States, it is difficult to understand what combination of 

forces caused him to give way. But at least it can be said 

that the inhabitants of the island benefited materially from 

the monetary experiment which took place, when the 

island Parliament created its own money — 'interest free' 

over 1 50 years ago. 


Although the original experiment came to an abrupt end 
in 1836, there was a further development in 1914, just 
after the outbreak of the first world war. The demand for an 
increase in the supply of money was then so great that the 
Royal Court passed an Ordinance making State notes and 
those issued by the Banks legal tender. But the Banks were 
prohibited from increasing their note issue, and all 
additional notes were issued by the States. 

There was a great demand for these States notes, and 
they first had to be printed locally by two firms in the island: 
the Star Company and the Guernsey Press Company, who 
were able to provide what proved to be very serviceable five 
shilling and ten shilling notes. These were later replaced 
by notes printed on proper bank-note paper with the 
customary watermark. The local banks have now been 
absorbed by the Big Five, so that there is no other local note 
issue, other than that of States notes which circulate 
alongside the more familiar Bank of England notes. 

Readers who would be interested to follow up the ideas contained in this 
pamphlet are recommended the following publications: 

Inflation — is there a cure? by Edward Holloway. 

Expansion or Explosion by Antony Vickers. The Bodley Head. 

Economic Tribulation by Vincent Vickers (one time Director of the Bank of 
England). The Bodley Head. 

Great Britain & World Trade edited by Edward Holloway. 

All the above are obtainable from the Economic Reform 
Club & Institute 2a Queen's Parade London N 10